Maytas Truths: How Should Public Infrastructure Be Funded?
Niranjan Rajadhyaksha -
Tuesday, January 27, 2009 1:57 PM
The Maytas controversy has laid bare the extent of crony capitalism in India, with politicians and select businessmen entering cosy deals under the guise of public-private partnerships, or PPP.
For a detailed look at the award of the huge Rs 12,000 crore contract to Maytas to build and operate the Hyderabad Metro, please read an excellent article by transport activist C. Ramachandriah in the Economic And Political Weekly 17 January edition.
Gulzar Natarajan has a very good post on PPP in urban mass transit systems.
"The debate surrounding the proposal for a Metro-rail project for Kochi in Kerala has thrown up several interesting issues. None more important than whether the project should be done as a Public Private Partnership on a BOT or a as a purely government enterprise. It was originally proposed that the 25 km, Rs 3048 Cr project would be executed on PPP on a BOOT/BOT model. But now the Planning Commission of India wants it to be a PPP, while the Ministry of Urban Development prefers government funding, as a joint venture between the Central and State Governments.
The Ministry argues that a comparison of the only two PPP Metros in the country - Bombay (Reliance) and Hyderabad (Maytas) (both not yet operational, with the latter in serious dount now) - and the fully Government driven Metros - Delhi, Chennai, Calcutta, and Bangalore - shows that the latter is a more cost-effective and superior model. They rest their arguement on the grounds that the commercial viability of Metros is questionable and experience from across the world shows that such projects will need heavy Government patronage.
The Secretary, Urban Development, Government of India, has said that PPP model for Metro may fail not only because of the commercial unviability of such projects, especially in its initial years, but also because of the near certain possibility that "the terms and conditions in (any such) agreement would in all likelihood be in favour of the private firm and might not accord priority to public interest".
I am inclined to the Ministry's view that atleast the construction should be funded by the Government, for the following reasons..."
Read the entire post here.